Theranos Is Shutting Down

The Silicon Valley startup is expected to shutter its operations after it failed to deliver revolutionary lab-testing amid allegations of fraud.

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Elizabeth Holmes, founder and chief executive of Theranos in 2015. She has been barred from serving as an officer or director of any public company for 10 years.CreditCreditDavid Paul Morris/Bloomberg via Getty Images

Theranos is going out with barely a whisper. Once heralded as a revolutionary new way to conduct a blood test to detect myriad diseases, all with a single finger prick, the company is making preparations to close its operations, according to a letter sent to shareholders.

“We are now out of time,” David Taylor, the company’s chief executive and general counsel, informed investors in an email first reported on Tuesday by The Wall Street Journal, whose in-depth investigation unraveled the company’s claims. Mr. Taylor declined to comment further, saying the letter spoke for itself.

Theranos’s efforts are now focused on avoiding bankruptcy.

It’s in default under a credit agreement reached last year with Fortress Investment Group, Mr. Taylor told shareholders. The company is negotiating a settlement with Fortress, which would then own the company’s intellectual property and allow Theranos to distribute its remaining cash — some $5 million — to unsecured creditors.

“Because the company’s cash is not nearly sufficient to pay all of the creditors in full, there will be no distribution to shareholders” under the plan, Mr. Taylor said in the letter.

The Theranos board is expected to meet on Friday, and the process of dissolving the company is expected to take six to 12 months.

Founded in 2003 by Elizabeth Holmes, a 19-year-old Stanford University dropout, Theranos promised to shake up the entire lab industry, making blood tests much easier and less expensive than traditional methods.

Lawyers for the company and Ms. Holmes did not respond to requests for comment.

Ramesh Balwani, the company’s former president who continues to fight the civil and criminal charges against him, issued a statement through a representative: “As an investor who put millions of dollars of his own money and nearly seven years of his life into Theranos, Mr. Balwani was saddened to see the letter from Theranos to investors yesterday.”

Reed Abelson covers the business of health care, focusing on health insurance and how financial incentives affect the delivery of medical care. She has been a reporter for The Times since 1995. @ReedAbelson

A version of this article appears in print on , on Page B3 of the New York edition with the headline: Theranos, Built on Deception and on the Brink of Bankruptcy, Is Shutting Down. Order Reprints | Today’s Paper | Subscribe